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Are Battery Powered Vehicles the Future?

The Economist Magazine made several over-the-top statements about electric vehicles in its August 21 issue, not the least of which was that the cost of ownership between an internal combustion engine powered vehicle and a BEV would soon be comparable.

Let’s take a look at ownership costs, as objectively as possible. Assume an 8-year battery warranty, and an average of 10,000 miles per year. This is the warranty for the GM Bolt.

Caveat: Only the manufacturer knows what the costs are for various components.

Note: Assumes cost of motors and controllers equal to cost of transmission

As of this writing, the cost of ownership of a BEV is considerably higher, approximately $12,000, than for an ICE powered car.

The cost of the battery is the most critical variable.

Future battery costs

If battery costs are lowered to $150 / kWh, the cost differential will be reduced to $8,000.

This is still a substantial premium over an ICE vehicle.

The lowest cost estimate by any research organization that I have seen for batteries is $125 /kWh, sometime in the future.

At $125, the cost of ownership will still be $6,000 greater than for an ICE vehicle.

People can quibble over these cost comparisons, but using these assumptions the mathematics is straight forward and gives these results.

It’s unlikely that BEVs will have ownership costs comparable with ICE vehicles any time soon.

The Economist Magazine and other media outlets have an agenda that is influencing their reporting. The media are promoting CO2 reductions, and it requires BEVs to replace ICE vehicles to achieve the reductions they claim are necessary to prevent catastrophic global warming.

Other observations

Higher costs for gasoline and electricity have modest effects on the overall cost of ownership.

Increasing the cost of gasoline to $4 per gallon only increases the cost of owning an ICE vehicle by $3,000. Doubling the cost of electricity only increases the cost of owning a BEV by $2,800.

In states having high taxes and high electricity costs, these two variables tend to cancel each other.

Referring to Table 2: It appears as though the manufacturers of BEVs are incurring losses that could be as high as $7,000 with the sale of each BEV.

With a battery cost of $150 / kWh, the loss may still be as much as $4,000 per BEV.

This would indicate that the price of BEVs must increase, which will increase BEV cost of ownership.

Definitions for types of electrified vehicles

BEVs are vehicles powered entirely by battery power.

PHEVs use the battery to travel the first 35 miles, then switch to an internal combustion engine to extend its range.

HEVs are essentially battery-assisted vehicles that use the internal combustion engine to power the car. Batteries don’t provide the motive power for the vehicle.

Conclusion

Ownership costs of BEVs will remain more than for an ICE vehicle for many years in the future.

If market forces are allowed to decide the future for light vehicles, it could well be that HEVs, getting 55 mpg with lower first costs, a range of 400 miles and some of the attributes of BEVs, may be the winner.

The assumptions used for these calculations can be challenged, but this format provides for a structured discussion. The Economist and other media merely make grandiose statements lacking references to calculations on which their statements are based.

Please forward this to others so they can use the same structure, inserting whatever variables they wish.

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More on the cost of parts:

You may have noticed the apparent high cost of the replacement battery, which is estimated to be about 30% greater than the cost of manufacturing the battery.

Manufacturers frequently add 50% to 100% to their manufacturing costs to arrive at the price for their replacement parts.

In this instance, a 30% adder is very reasonable.

Manufacturers justify the high cost of spare parts in two ways:

The cost of stocking must be covered in the price of the replacement part. E.g., the cost of storage space, money, and handling.

Manufacturers know the requirements of their product and manufacture their replacement parts to meet those requirements. Parts made by others may not meet the required specifications and may even damage the product.

When GM warrantees the Bolt’s battery pack for 8 years/100,000 miles, how can the cost of ownership of owning a BEV include the cost of the battery? (BTW, Tesla’s warranty is 8 years/unlimited miles.)

To the point of a worn-out battery pack, that would be reflected in the resale value of the car after 8 years or whenever — just as the value of a worn-out ICE (and transmission) is reflected in its resale value.

I apologize for not replying sooner, but I have been away and didn’t have an opportunity to get on the Internet other than to read my emails.

The cost of the battery is part of the cost of the vehicle, just like the cost of the ICE is part of the cost of an ICE vehicle.
The warranty merely provides assurance that the owner won’t pay twice for the battery if it fails.
There are two ways to arrive at the cost of ownership.
One is to include all the costs in a cost buildup, such as I have done.
The second way is to try to estimate the depreciation of the vehicle.
I chose the former because trying to estimate depreciation is unwieldy, and would only elicit arguments. For example, when assessing the life of the ICE engine, should we use 150,000 miles or 200,000 miles?
Another example that makes it difficult to determine depreciation is how to depreciate the battery. Is it over 8 years or 10 years? And what is the residual value, if any, of the worn-out battery? Or is disposing of the battery an added cost.
My article fairly estimates the total costs and asks others to use whatever costs they think are appropriate.
It demonstrates that the cost of owning a battery-powered vehicle is greater than owning an ICE vehicle and that this cost disparity won’t change anytime soon.